RBI may oblige with 25 bps repo rate cut: ET Now Poll

NEW DELHI: Despite a cautious stance maintained by the Reserve Bank of India (RBI) for over a year now, most analysts expect the central bank to oblige with a 25 basis points repo rate cut in its third quarter review of monetary policy on Tuesday.

According to an ET Now poll, 85% of the participants expect a 25 basis point rate cut, while 5% are optimistic enough for a 50 basis point cut. However, 10% of the analysts polled see the RBI maintaining status quo.

On the other hand majority feel that the RBI will keep the cash reserve ratio untouched. As much as 85% of the analysts see no change in CRR, while 10% see a 25 basis points cut and 5% think that as much as a 50 basis point reduction may happen.

A divided opinion on whole sale price index (WPI) was seen, with 50% of the analysts expected a 7% inflation by March end. 35% feel that inflation may dip below 7% and 15% see it greater than 7%.

However, RBI threw markets and industry into a tizzy by suggesting that the first cut in interest rates in nine months, widely viewed as a slam dunk event at Tuesday's monetary policy review, could no longer be taken for granted.

On the eve of the keenly expected review, the central bank, whose officials have already tempered hopes of aggressive rate cuts in the past few weeks, struck a hawkish tone on the state of fiscal and current account deficits, appearing to throw into question even the much-expected 25-basis-point reduction in rates.

"Given the preponderance of non-monetary factors behind the current slowdown in an environment where risks from high inflation, current account and fiscal deficits still remain, the scope for supportive monetary policy action is constrained," said RBI's Macroeconomic and Monetary Developments Third Quarter Review. "As reform actions get executed, monetary policy could increasingly focus on growth revival."